The historical parallels of climate change

Dealing with climate change requires abandoning fossil fuels – a big challenge, given how integral they are to the functioning of our society.

What historical parallels are there for such societal re-organizations? Obviously, there isn’t anything that perfectly matches this situation. That being said, it seems plausible that there are historical incidents and periods worth studying, in order to help develop better strategies for going forward.

The obvious example is the abolishment of slavery, which was also an important part of the economic basis for societies at one point. Relevant environmental examples include ozone depletion, acid rain, and persistent organic pollutants.

How about the arrival of farming and domestication of animals, a change from the hunter/gatherer thingy. How about the invention of the internal combustin engine, replacing human labour/ horses etc.? How about the invention of refrigeration and air conditioning, allowing humans to labour under reasonable conditions? How about the rise of unions and the creation of the middle class? How about the invention of democracy?

One thing that I think really distinguishes climate change from past revolutions in human life, such as the initial rise of agriculture or the Industrial Revolution, is that our response will need to be planned, if we are to avoid a disastrous outcome.

When the Industrial Revolution was happening, people responded in an uncoordinated way to changing conditions – taking into account their immediate circumstances, with little concern for the cumulative effect. Coal got cheaper, so people smelted more iron. Iron got cheaper, so they built more railroads, etc.

Rather than be a bottom-up amalgamation of private choices, effective climate policy needs to come from the top to a considerable extent. The reason comes down to the basic characteristics of climate change: it cannot be solved locally, and local efforts are ultimately meaningless unless they become systematic.

For a number of reasons, both pragmatic and theoretical. I only have time to sketch them out very briefly here, however.

Firstly, replacing our economic system would require enormous effort. It is not clear whether any alternative system could do a better job. Surely, it is a lower risk strategy to reduce the hypocrisy of capitalism – by internalizing externalities and so forth – than to launch an ambitious experiment with no guarantee of success.

Secondly, governments are bad at planning. They are easily corrupted, and prone to waste. Market mechanisms impose a kind of discipline that can create the semblance of group intelligence – for instance, an increased price for any commodity drives people to substitute, innovate, and otherwise respond simply as a matter of their own self interest.

Thirdly, in many areas, not that much planning is really required. Given how conservative bureaucracies can be, we are probably better off when areas of technological and cultural innovation can operate with relatively little oversight. Of course, there is the need for regulation to prevent abuses, including the reckless endangerment of third parties.

Fourthly, there is a legitimate sense in which capitalism is an emergent property of individual liberty. People who are free to make deals with one another will quickly establish at least a pseudo-capitalist system. Naturally, there is still plenty of scope for abuse within such a system, but quashing those impulses entirely is at odds with the idea that people should be able to make important life choices for themselves.

There are certainly important areas in which we need to plan. Key examples are climate change and important non-renewable resources (not just fossil fuels, but also things like helium). Capitalism has enormous capacity to improve human welfare, but also has dangerous tendencies towards short sightedness and considerable scope for abuse. Government behaves most effectively, then, when it acts to curtail the destructive tendencies of the system, without choking off its ability to do good.

First off, I want to say I appreciate your many pronged and thoughtful response. But, of course, I still disagree:

” replacing our economic system would require enormous effort. ”

If our current economic system cannot solve its crises, but only displace them geographically, it seems morally necessary to replace it – whether it’s convenient or not.

“Secondly, governments are bad at planning.”

This seems demonstrably false. Up until the 1960s, there were real questions as to whether the Soviet economy was more efficient, or produced more or less growth, than the “capitalist” economy. And since overall growth has declined since the 60s, current growth is logically behind soviet era command growth, eh?

” Given how conservative bureaucracies can be, we are probably better off when areas of technological and cultural innovation can operate with relatively little oversight.”

It doesn’t seem obvious at all that technological or cultural accumulation require capitalist conditions. There are plenty of companies motivated by purpose, rather than profit, in the high-tech sector. Command economy should not be equivocated with “oversight”, command concerns granting goals are resources. Also, capitalism can’t be equated with “freedom”, since management structures are usually anything but liberating for creativity – ergo the success of non-standard management practices.

“there is a legitimate sense in which capitalism is an emergent property of individual liberty.”

No. Individual liberty requires the resources necessary to undertake my own projects, as well as free speech, freedom from repression, etc… Rawls outlines this handily. There is no need for liberty to include liberty to accumulate capital. One has no inherent right to the fruits of one’s labour, because the fruits of one’s labour are never the product of an individual – but always an individual within a context of being supplied with liberty and resources.

“Capitalism has enormous capacity to improve human welfare,”

So does slavery. Slave conditions improved drastically between the 17th and 19th centuries in the American South. The fact a system improves human welfare is not an argument in favour of it.

I don’t have the answers. I think, actually, to demand me to have a fully-formed theory of post-capital economics in order to be allowed to criticize capitalism is a pretty poor argument.

Instead, I think post-capitalism should stop being excluded from civic discussion.

Personally I’m in favour of reforms moving in the direction of economic democracy, voluntary federalism, i.e. some form of moderate syndicalist anarchism.

But, I’m not in favour of just changing everything because I feel like it – I think we need to have open and honest debate that doesn’t exclude possibilities on ideological grounds. For instance, if you can’t talk about the internal contradictions of capital accumulation because of an ideological barrier, that’s a problem.

I think for starters, we should be moving towards much stricter limits on wealth, i.e. enforce 100% tax on the wages paid to the highest paid employee of a company which exceed 6 or 7 times what the lowest paid employee receives.

We should take seriously the evidence that shows economic incentives hurting performance on cognitively difficult tasks. The evidence (see the video I posted on the “Motivations” post) seems to show we should pay people enough to make money a non-issue – and then look for motivation in purpose and mastery rather than bonus-incentives.

We should consider 3 billion dollar bonuses paid to hedge fund executives totally unacceptable. If only three such bonuses were expropriated, we could fund the electrification of all Canadian mainline railways.

“The fact is, it’s not unlikely that many people working for Apple, at least on US soil, are highly motivated by the desire to satisfy customers. This short film about motivation gives us a sense why – in cognitively heavy tasks, people are more motivated by purpose, autonomy, challenge and mastery, and making a contribution – rather than profit. The fact that apple products excel, both in the market and in objective excellence, suggests that the people working there are not merely profit motivated, but motivated by the purpose of improving computing and smartphones.

Apple is not like Linux – people at Apple do not work for free. And yet, the line between jobs people are willing to do for free and jobs people are paid for is likely to falter in the advanced high tech industry. Specifically because, if purpose-motive gets you the best talent and the best productivity, money will logically cease being the central factor in success of companies.”

I think for starters, we should be moving towards much stricter limits on wealth, i.e. enforce 100% tax on the wages paid to the highest paid employee of a company which exceed 6 or 7 times what the lowest paid employee receives.

What is the moral basis for this claim? If some employees add 10 times more value to a company than others, why is it inappropriate to reflect that in pay? Steve Jobs single-handedly rescued Apple from oblivion – an effort worth those of hundreds of simple Apple store employees.

Also, factually, I question whether anyone has ever received a three billion dollar bonus.

“What is the moral basis for this claim? If some employees add 10 times more value to a company than others, why is it inappropriate to reflect that in pay?”

Wealth I have is wealth someone else doesn’t have. There is no prima fascia reason why I am entitled to a benefit that make someone else worse off. If someone else is better off because I have this benefit, then, you could make an argument. But the lack of a relation of financial incentive to motivation in cognitive tasks suggests that Jobs isn’t lying when he says he works hard because he wants to satisfy customers. Maybe the desire to make people happy, i.e. having some purpose, is a much stronger motivator than the millions of dollars he earns.

Essentially you seem to be repeating a Nozickian position, which is just a flailing appear to the absoluteness of property rights. And has no basis in reality. For instance, in Canada you can’t even “own” property – you’re just a steward to the Queen. Ownership is always relative to some kind of social contract, and therefore subordinate to the moral order of life.

“New instruments, some of them quite astonishing, have begun to emerge. Hedge funds for example, there were about 300 of them 15 years ago, now there are something like 3000 of them. We’ve seen recently one of them going belly up and things like that but, still, the leading hedge fund managers last year personally took 250 million dollars each. That is, they each had a personal income of 250 million dollars in one year.”

“Neoliberalism and the City”
David Harvey, City University of New York

Inequality is not a problem in itself; inequality is a problem when its opportunity cost is saving the planet, and bringing millions out of hunger and hard labour.

So, I was wrong about the 3 billion dollar bonuses – but I’m not wrong that hedge fund salaries are in the billions. And, if it’s true that financial motivation does not improve performance in highly cognitive tasks, then this is literally billions and billions of dollars wasted.

A transition to a command economy could begin to take into account that people well-off are more motivated by purpose than by bonuses, and the money left over could be invested in higher labour rates – so that more and more people could join the ranks of those for whom money is not a central issue.

The discussion you bring up raises no serious criticism of Rawls’ argument concerning inequality. Your own criticism spoke of the “lexical priority” of the equality principle, which is strange, since I’ve never heard of the “equality principle”. What the book seems to say is:

“FIRST PRINCIPLE

(1) Each person is to have an equal right to the most extensive total system of equal basic liberties compatible with a similar system of liberty for all.

SECOND PRINCIPLE

(2) Social and economic inequalities are to be arranged so that they are both:

(a) to the greatest benefit of the least advantaged, consistent with the just savings principle, and

(b) attached to offices and positions open to all under conditions of fair equality of opportunity.

FIRST PRIORITY RULE (THE PRIORITY OF LIBERTY)

The principles of justice are to be ranked in lexical order and therefore the basic liberties can be restricted only for the sake of liberty. There are two cases:

(a) a less extensive liberty must strengthen the total system of liberties shared by all;
(b) a less than equal liberty must be acceptable to those with the lesser liberty

SECOND PRIORITY RULE (THE PRIORITY OF JUSTICE OVER EFFICIENCY AND WELFARE)

The second principle of justice is lexically prior to the principle of efficiency and that of the maximizing the sum of advantages; and fair opportunity is prior to the difference principle. There are two cases:

(a)an inequality of opportunity must enhance the opportunities of those with the lesser opportunity;

(b) an excessive rate of savings must on balance mitigate the burden of those bearing this hardship”

In truth, the liberty of bank managers to manipulate countries, and CEOs to manipulate shareholders and extract huge profits, are not “compatible with a similar system of liberty for all”. To say otherwise is not different than to say of the chosen few in the USSR who “earned” their way up into the party, that their power to choose who succeeds and who fails, and to extract huge personal renumeration, is not “incompatible” with the liberty of all Soviet citizens.

In short, “basic liberties” could not possibly include liberties to gain macro economic power. Economic power is an inequality which must be justified by increase in welfare and availability of opportunity to the least well off.

It appears to me that Rawls’ defence of the status quo is largely based on an insane interpretation of contemporary capitalism, something you’d be more likely to hear on Fox News than in any serious analysis – whether it be right or left wing:

“… a system of markets decentralizes the exercise of economic power. Whatever the internal nature of firms, whether they are privately or state owned, or whether they are run by entrepreneurs or managers elected by workers, they take the prices of outputs and inputs as given and draw up their plans accordingly. When markets are truly competitive, firms do not engage in price wars or other contests for market power. In conformity with political decisions reached democratically, the government regulates the economic climate by adjusting certain elements under its control, such as the overall amount of investment, the rate of interest, the quality of money and so on. There is no necessity for a comprehensive direct planning. Individual households and firms are free to make their decisions independently, subject to the general conditions of the economy.” (241)”

China’s banksGreat Wall Street
The rise of China’s state-backed banks is stunning. But success will force the model to change

Jul 8th 2010

THERE is no more potent symbol of the relative decline of Western finance than the revolution in Chinese banking over the past decade. While American and European banks have been busy blowing up, China’s have been transformed from communist bureaucracies crippled by bad debts into something resembling world beaters.

That metamorphosis has been completed by the flotation of Agricultural Bank of China, the last of the five big state-owned banks to list (see article). Even by Chinese standards it is colossal, with 320m customers, 441,000 staff and more branches than many Wall Street firms have desks. Four of the world’s ten biggest banks by market value are now Chinese. In 2004 none was. Better-known (and more global) lenders such as Deutsche Bank and Barclays look rather puny by comparison. It’s natural to wonder if more than just firms are being eclipsed: whether a freewheeling era is being superseded by a “Beijing consensus” of state-managed finance. Though neat, such a conclusion looks wrongheaded.

…

Even admirers, though, cannot fail to spot China’s bad-debt problem. Those who think capitalist democracies have an unrivalled talent for generating dud loans should consider the Middle Kingdom. After decades of mismanagement, by the late 1990s perhaps a third of all loans were sour, most of them owed by zombie state-owned enterprises. Cleaning that up left China a world leader in bail-outs. Since 1998 it has injected the equivalent of $420 billion into the biggest five banks alone, more than the outlays of America’s TARP bail-out fund. China’s reforms were meant to stop this ever happening again.

A repeat performance is exactly what some fear after the latest binge. Most worrying are loans to infrastructure projects sponsored by local governments (perhaps a sixth of outstanding loans) and, given a frothy property market, real-estate financing and mortgages (a fifth of the total, with some overlap with infrastructure loans). China’s bankers say they are relaxed but some investors are kept awake by visions of corrupt officials, roads to nowhere and deserted shopping malls.”

SIR – Lexington missed the most obvious explanation of why 70% of Americans support free enterprise but a convincing majority of them elected a president who seems lukewarm on the idea (June 19th). Americans do not really support free enterprise and more specific polling data bears this out. When Americans claim to support free enterprise in response to poll questions, what they really mean is that they are in favour of low taxes. Of course they are also fans of the largesse of a big welfare state. A more blunt translation of free enterprise in this context would be “something for nothing”. Baby-boomers seem particularly fond of this form of free enterprise shown by the sizeable amount of public debt they are bequeathing to future generations.

“One idea is to find previous occasions when big environmental changes came alongside social, political and military shifts. Droughts in the Central Asian steppe, for example, led to mass westward migration and the “barbarian” invasions that helped topple the Roman Empire (pictured above). Hunger and drought led to the collapse of Mayan civilisation a millennium ago. Sudden cooling wiped out an early European settlement on Greenland. The Dust Bowl of the 1930s forced over 2m people to migrate within the United States.”

“In the 1950s the Soviet economy was growing at around 5% a year, faster than the United States. But productivity was low and stagnant. For that extra output, the Soviet Union was burning capital. That, in a nutshell, is Mr Spufford’s story of what went wrong—and was bound to go wrong.

…

Mr Spufford’s “pre-history of perestroika”, as he calls it, is clear in its judgment that the Soviet Union was in most ways an awful place. But he has done something better than repeat the obvious. He has shown in human detail how and why the system was believable. Such sympathy saves the book from sneering. One way the author makes his characters come alive is by not crediting them with more than they knew or letting them see further than they could have done. When you are in a system, any system, it is hard to imagine yourself in another. Mr Spufford, who has turned the trick, knows how hard. He has no need to hammer the point—but “Red Plenty” is also a lesson against any Western smugness.”

Former US vice-president says green revolution is bigger than industrial revolution and happening at faster pace than digital revolution

The fight against global warming is one of humanity’s great moral movements, alongside the abolition of slavery, the defeat of apartheid, votes for women and gay rights, according to the former US vice-president and climate campaigner, Al Gore.

…

“The climate movement should be seen in the context of the great moral causes that have transformed and improved the outlook for humanity,” he told the Ashden green energy awards ceremony. “It was wrong to allow slavery to continue, it was wrong to deny women the right to vote, it was wrong to discriminate on the basis of skin colour or who you fell in love with.

“When the central issue was thus framed in stark relief because of who we are as human beings, the outcome became foreordained,” Gore said. “We chose what was right, and now in this case it is clearly wrong to destroy the prospects of living prosperously and sustainably on a clean earth when we bequeath it to our children. It is wrong to use the sky as an open sewer, it is wrong to condemn future generations to a lifetime haunted by continual declines in their standard of living, and give them a world of political disruption and all the chaos that the scientists have warned us about.”

…

“There is now in our world a sustainability revolution and it’s best understood, in my view, by placing it in the context of other great global transformations – the agricultural revolution, the industrial revolution, the digital revolution,” he said. “This sustainability revolution has the breadth and magnitude of the industrial revolution but it has the speed of the digital revolution.

“Instead of beginning in a corner of the UK in a world of 1.5bn people, and then slowly spreading to western Europe and North America, this sustainability revolution is being jump started in rich and poor countries alike in every corner of this world of 7.4 billion people,” he said, likening it to the rapid spread of mobile phones around the world.